The information in this report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical facts, that address activity, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “continue,” “estimate,” “expect,” “forecast,” “initial,” “intend,” “likely,” “may,” “plan,” “potential,” “project,” “proposed,” “should,” “will,” “would” and similar expressions are intended to identify forward-looking statements. These forward-looking statements relate to, among other things:

Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. These statements are subject to a number of known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from any future results or performance expressed or implied by the forward-looking statements. Factors that could cause actual results and performance to differ materially from any future results or performance expressed or implied by the forward-looking statements include, but are not limited to, the following:

To the extent applicable, and as used in this quarterly report, the terms listed below have the following meanings:

The terms “we,” “our,” “us,” “Tellurian” and the “Company” as used in this report refer collectively to Tellurian Inc. and its subsidiaries unless the context suggests otherwise. These terms are used for convenience only and are not intended as a precise description of any separate legal entity associated with Tellurian Inc.

We plan to develop, own and operate a global natural gas business and to deliver natural gas to customers worldwide. Tellurian is developing a portfolio of natural gas, production, LNG marketing, and infrastructure assets including athat includes an LNG terminal facility (the “Driftwood terminal”) and, an associated pipeline (the “Driftwood pipeline”) in southwest Louisiana. Tellurian plans to develop, other related pipelines, and upstream natural gas assets. The Driftwood terminal and the Driftwood pipeline as part of what we refer to as the “Pipeline Network.” The Driftwood terminal, the Pipeline Network and certain natural gas production assets are collectively referred to as the “Driftwood Project”.

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain notes and other information have been condensed or omitted. The accompanying interim financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of our Condensed Consolidated Financial Statements. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Our Condensed Consolidated Financial Statements were prepared in accordance with GAAP, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business as well as the Company’s ability to continue as a going concern. As of the date of the Condensed Consolidated Financial Statements, we have generated losses and negative cash flows from operations, and have an accumulated deficit. We have not yet established an ongoing source of revenues or other sources of liquidity that are sufficient to cover our future operating costs and obligations as they become due during the twelve months following the issuance of the financial statements.

The Company has sufficient cash on hand and available liquidity to satisfy its obligations and fund its working capital needs for at least twelve months following the date of issuance of the condensed consolidated financial statements. The Company has the ability to generate additional proceeds from various other potential financing transactions, such as issuances of equity, equity-linked and debt securities, or similar transactions to fund our obligations and working capital needs.

To conform with GAAP, we make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements and the accompanying notes. Although these estimates and assumptions are based on our best available knowledge at the time, actual results may differ.

Property, plant and equipment is comprised of fixed assets, proved oil and natural gas properties and financefinancing leases, as shown below (in thousands):

We own land in Louisiana for the purpose of constructing the Driftwood Project.

    As of September 30, 2020, the deferredDeferred engineering balancecosts of approximately $110.5$110.0 million representsrepresent detailed engineering services related to the planned construction of the Driftwood terminal. Thisterminal as of September 30, 2021. The balance in this account will be transferred to construction in progress upon reaching FID.an affirmative FID by the Company’s Board of Directors.

We hold lease and purchase option agreements (the “Options”) for certain tracts of land and associated river frontage. Upon exercise of the Options, the respective leases will beare subject to maximum terms of 50 years inclusive(inclusive of various renewals, which are at our sole discretion.the option of the Company). Costs of the Options will be amortized over the life of the lease once obtained, or capitalized into the cost of land if purchased.

In conjunction with the dismissal of theprior litigation, disclosed in Part I, Item 3, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, we agreed to reimburse the Vice-ChairmanVice Chairman of our Board of Directors, Martin Houston, for reasonable attorneys’ fees and expenses he incurred during the litigation. As of September 30, 2020, we have paid approximately $5.1 million to third parties to settle outstanding2021, all amounts incurred by Mr. Houston for reasonable attorneys’ fees and expenses. We have also agreed to pay Mr. Houston approximately $2.3 million for other expenses he incurred in connection with the litigation. As of September 30, 2020, a balance of approximately $1.4 million remained owed to Mr. Houston were fully settled.

Over the remaining repayments are scheduled as follows (in thousands):

On July 19, 2021, we entered into an uncommitted trade finance credit line for up to $30.0 million that is intended to finance the Company waspurchase and sale of LNG cargoes for ultimate resale in compliance with all covenants under its credit agreements. Refer to Note 6, Financial Instruments, for detailsthe normal course of hedging transactions, asbusiness. As of and for the period ended September 30, 2020, entered into as required by the 2018 Term Loan described above.

In connection with our LNG trading activities, we have previously entered into a master LNG sale and purchase agreement and related confirmation notices (collectively, the “SPA”)agreements with an unrelated third-party LNG merchant. Pursuantmerchants pursuant to the SPA,which we committedare obligated to purchase one1 cargo of LNG per quarter through October 2022.2022 at a price based on then-prevailing JKM prices. The volume of each cargo is expected to range from 3.3 to 3.6 million MMBtu, and each cargo will be purchased under DES terms. The price of each cargo will be based on the JKM price in effect at the time of each purchase.

On February 11, 2020,August 6, 2021, we sold 2,114,59135.0 million shares of our common stock in a registered directan underwritten public offering at a price of $6.36$3.00 per share. Net proceeds from this offering, after deducting fees and expenses, were approximately $13.1$100.8 million. Additionally, on July 24, 2020, we completed a registered direct offering pursuantThe underwriters were granted an option to which we sold 35,000,000purchase up to an additional 5.3 million shares of our common stock at an offering pricewithin 30 days. On August 31, 2021, the underwriters exercised this option, which generated net proceeds, after deducting fees, of $1.00 per share. Net proceeds from this transaction were approximately $32.8$15.1 million.

In March 2018, we entered into a preferred stock purchase agreement with BDC Oil and Gas Holdings, LLC (“Bechtel Holdings”), a Delaware limited liability company and an affiliate of Bechtel Oil, Gas and Chemicals, Inc., a Delaware corporation, pursuant to which we sold to Bechtel Holdings approximately 6.1 million shares of our Series C convertible preferred stock (the “Preferred Stock”).

The holders of the Preferred Stock do not have dividend rights but do have a liquidation preference over holders of our common stock. The holders of the Preferred Stock may convert all or any portion of their shares into shares of our common stock on a 1-for-one basis. At any time after “Substantial Completion” of “Project 1,” each as defined in and pursuant to the LSTK EPC Agreement for the Driftwood LNG Phase 1 Liquefaction Facility, dated as of November 10, 2017, or at any time after March 21, 2028, we have the right to cause all of the Preferred Stock to be converted into shares of our common stock on a 1-for-one basis. The Preferred Stock has been excluded from the computation of diluted loss per share because including it in the computation would have been antidilutive for the periods presented.

We have granted restricted stock and restricted stock units (collectively, “Restricted Stock”), as well as unrestricted stock and stock options, to employees, directors and outside consultants (collectively, the “grantees”) under the Tellurian Inc. 2016 Omnibus Incentive Compensation Plan, as amended (the “2016 Plan”), and the Amended and Restated Tellurian Investments Inc. 2016 Omnibus Incentive Plan (the “Legacy Plan”). The maximum number of shares of Tellurian common stock authorized for issuance under the 2016 Plan is 40 million shares of common stock, and no further awards can be granted under the Legacy Plan.

Upon the vesting of restricted stock, shares of common stock will be released to the grantee. Upon the vesting of restricted stock units, the units will be converted into either cash, stock, or a combination thereof. As of September 30, 2020, there was no Restricted Stock that would be required to be settled in cash.    

As of September 30, 2020,2021, we had approximately 28.330.2 million shares of performance-based Restricted Stock outstanding, of which approximately 19.419.2 million shares will vest entirely at FID, as defined in the award agreements, and approximately 8.210.2 million shares will vest in one-third increments at FID and the first and second anniversaries of FID. The remaining shares of performance-based Restricted Stock, totaling approximately 0.70.8 million shares, will vest based on other criteria. As of September 30, 2020,2021, no expense had been recognized in connection with performance-based Restricted Stock.

Due to our cumulative loss position, historical net operating losses (“NOLs”), and other available evidence related to our ability to generate taxable income, we have recorded a full valuation allowance against our net deferred tax assets as of September 30, 20202021 and December 31, 2019.2020. Accordingly, we have not recorded a provision for federal, state or foreign income taxes during the three and nine months ended September 30, 2020.2021.

We experienced ownership changes as defined by Internal Revenue Code (“IRC”) Section 382 in 2017, and an analysis of the annual limitation on the utilization of our NOLs was performed at that time. It was determined that IRC Section 382 will not limit the use of our NOLs over the carryover period. We will continue to monitor trading activity in our shares that may cause an additional ownership change, which may ultimately affect our ability to fully utilize our existing NOL carryforwards.

As of September 30, 2020,2021, our financing leases had a corresponding right of use asset of approximately $20.1$58.2 million, which is recognized within Property, plant and equipment, net, and a totalcorresponding lease liability of approximately $13.5$50.3 million, most of which is recognized inwithin Other non-current liabilities. For the three and nine months ended September 30, 2021 and 2020, our financefinancing lease costs, which are associated with the interest on our lease liabilities, were approximately $1.0 million and $0.5 million, respectively, and $1.9 million and $1.2 million, respectively, of which approximately $0.2 million has been paid as of September 30, 2020.respectively. For the three and nine months ended September 30, 2020,2021, we paid approximately $0.2$1.0 million and $1.8 million, respectively, in cash for amounts included in the measurement ofrequired finance lease liabilities, all ofpayments which are presented within the financeoperating section of our cash flows.the Condensed Consolidated Statements of Cash Flows. For each of the nine months ended September 30, 2021 and 2020, we paid approximate $1.8 million, in required financing lease payments which are presented within the financing section of the Condensed Consolidated Statements of Cash Flows.

Our office space leases are classified as operating leases and include one1 or more options to extend the lease term for up to 10 years, at our sole discretion. As we are not reasonably certain that those options will be exercised, none are recognized as part of our right of use assets and lease liabilities. As of September 30, 2020,2021, our weighted-average remaining lease term for our operating leases was approximately sixfive years. As none of our operating leases provide an implicit rate, we have determined our own discount rate, which, on a weighted-average basis at September 30, 2020,2021, was approximately 8%.

As of September 30, 2020,2021, our operating leases had a corresponding right of use asset of approximately $12.3$10.6 million, which is recognized within Other non-current assets, and a total lease liability of approximately $14.1$12.2 million which is recognized within Accrued and other liabilities (approximately $1.9$2.1 million) and Other non-current liabilities (approximately $12.2$10.1 million). For the three and nine months ended September 30, 20202021 and 2019,2020, our operating lease costs were $0.7 million and $0.9$0.7 million, respectively, and $2.1 million and $2.7$2.1 million, respectively. For the three and nine months ended September 30, 20202021 and 2019,2020, we paid approximately $0.7$2.1 million and $0.9 million, respectively, and $2.1 million, and $2.3 million, respectively, in cash for amounts included in the measurement ofrequired operating lease liabilities, all ofpayments, which are presented within the operating cash flows.section of the Condensed Consolidated Statements of Cash Flows.

The table below presents a maturity analysis of our lease liability on an undiscounted basis and reconciles those amounts to the present value of the lease liability as of September 30, 20202021 (in thousands):

The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past development activities, current financial condition and outlook for the future organized as follows:

Tellurian Inc. (“Tellurian,” “we,” “us,” “our,” or the “Company”) intends to create value for shareholders by building a low-cost, global natural gas business, profitably delivering natural gas to customers worldwide (the “Business”). We are developing a portfolio of natural gas, production, LNG marketing, and infrastructure assets that includes an LNG terminal facility (the “Driftwood terminal”) and, an associated pipeline (the “Driftwood pipeline”), other related pipelines, (the “Pipeline Network”). We refer toand upstream natural gas assets. The Driftwood terminal and the Driftwood terminal, the Pipeline Network and certain natural gas production assetspipeline are collectively referred to as the “Driftwood Project”. Our existing upstream propertiesnatural gas assets consist of 10,0679,750 net acres and 71interests in 74 producing wells located in the Haynesville Shale trend of northern Louisiana. Our Business may be developed in phases.

    In connection with the implementationAs part of our Business,execution strategy, we will consider partnering with third parties across the natural gas value chain. We are offering limited partnership interestsalso pursuing activities such as direct sales of LNG to global counterparties, the acquisition of additional upstream acreage, the drilling of new wells on our existing or newly acquired upstream acreage and trading LNG. As discussed in a subsidiary, Driftwood Holdings LP (“Driftwood Holdings”), which will own“Overview of Significant Events – LNG Sale and Purchase Agreements” below, we entered into four LNG SPAs with three unrelated purchasers, completing the Driftwood Project. Partners will contribute cash in exchangeplanned sales for equity in Driftwood Holdingsplants one and will receive LNG volumes at the cost of production, including the cost of debt, for the lifetwo of the Driftwood terminal.terminal (“Phase 1”). We plan to retain a portionare currently focused on securing financing for the construction of the ownership in Driftwood Holdings and have engaged Goldman Sachs & Co. and Société Générale to serve as financial advisors for Driftwood Holdings.Phase 1.

We continue to evaluate, and discuss with potential partners, the scope and other aspects of the Driftwood Projectour Business in light of the evolving economic environment, investor needs of potential partners and other factors. As a result of these discussions,How we are evaluating certain potential changes to the project that, among other things, could significantly reduce the overall cost of Phase 1 of the project. Whether we implement changes to the projectexecute our Business will be based on a variety of factors, including the results of our continuing analysis, changing business conditions and investormarket feedback.

Subsequent to entering into LNG SPAs with Gunvor Singapore Pte Ltd and Vitol Inc. for the 2019 Term Loan

On April 28, 2020, Driftwood Holdings entered into the third amendment (the “Third Amendment”) to the 2019 Term Loan which became effective on April 29, 2020. In conjunction with the Third Amendment,August 6, 2021, we repaid $17.1 million of the outstanding principal balance using approximately 9.3sold 35.0 million shares of our common stock and $2.1 million in cash and a warrant to purchase approximately 4.7 million shares of our common stockan underwritten public offering at a strike price of $1.542. The number of shares issuable under the warrant may be reduced if we make any partial cash repayment of the 2019 Term Loan principal prior to its vesting in full on October 29, 2020.

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We are currently funding our operations, development activities and general working capital needs through our cash on hand as well as proceeds from various potential financing transactions, such as utilizing our at-the-market program, equity issuances, equity-linked and debt securities or similar transactions.hand. Our current capital resources consist of approximately $77.9$210.8 million of cash and cash equivalents as of September 30, 2020, on a consolidated basis, of which approximately $44.6 million is maintained at a wholly owned subsidiary of Tellurian Production Holdings LLC. We have the ability to raise funds through common or preferred stock issuances, debt financings, an at-the-market equity offering program or the sale of assets.2021. We currently maintain ouran at-the-market equity offering program under which, as of the date of this filing, we have remaining

As of September 30, 2021, we had contractual obligations associated with our financing and operating leases totaling $218.7 million, net of approximately $0.9which $7.1 million in feesis scheduled to be paid within the next twelve months.

The Company has sufficient cash on hand and commissions.available liquidity to satisfy its obligations and fund its working capital needs for at least twelve months following the date of issuance of the condensed consolidated financial statements. The Company has the ability to generate additional proceeds from various other potential financing transactions, such as issuances of equity, equity-linked and debt securities, or similar transactions to fund our obligations and working capital needs.

The following table summarizes the sources and uses of our cash and cash equivalents and costs and expenses for the periods presented (in thousands):

Cash used in operating activities for the nine months ended September 30, 20202021 decreased by approximately $29.9$17.6 million compared to the same period in 20192020 due to an overall decrease in disbursements as a result of the reorganization in the normal coursefirst quarter of business.2020.

Cash used in investing activities for the nine months ended September 30, 2020 decreased2021 increased by approximately $67.2$24.0 million compared to the same period in 2019.2020. This decreaseincrease is predominantly driven by decreasedincreased natural gas development activities.

The activities we have proposed will require significant amounts of capital and are subject to risks and delays in completion. We have received all major regulatory approvals for the construction of Phase 1 and, as a result, our business success will depend to a significant extent upon our ability to obtain the funding necessary to construct assets on a commercially viable basis and to finance the costs of staffing, operating and expanding our company during that process. We have initiated certain owner construction activities.

We currently estimate the total cost of the Driftwood Project as well as related pipelines and upstream natural gas assets to be approximately $28.9$25.0 billion including owners’ costs, transaction costs and contingencies but excluding interest costs incurred during construction of the Driftwood terminal and other financing costs. We have entered into four LSTK EPC agreements currently totaling $15.5 billion, or $561 per tonne, with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for construction of the Driftwood terminal. The proposed Driftwood terminal will have a liquefaction capacity of up to approximately 27.6 Mtpa and will be situated on approximately 1,000 acres in Calcasieu Parish, Louisiana. The proposed Driftwood terminal will include up to 20 liquefaction Trains, three full containment LNG storage tanks and three marine berths.

In addition, thepart of our strategy involves acquiring additional natural gas production activities we are pursuing will require considerable capital resources.properties, including properties in the Haynesville shale trend. We intend to pursue potential acquisitions of such assets, or public or private companies that own such assets. We would expect to use stock, cash on hand, or cash raised in financing transactions to complete an acquisition of this type.

We anticipate funding our more immediate liquidity requirements relative to the detailed engineering work and other developmental costs, natural gas development costs, and general and administrative costs through the use of cash on hand, proceeds from operations, and proceeds from completed and future issuances of securities by us. Consistent with our overall financing strategy, the Company has considered, and in some cases discussed with investors, various potential financing transactions, including issuances of debt, equity and equity-linked securities or similar transactions, to support its short- and medium-term capital requirements. The Company will continue to evaluate its cash needs and business outlook, and it may execute one or more transactions of this type in the future.

We currently expect that our long-term capital requirements will be financed by proceeds from future debt, equity and/or equity-linked transactions. In addition, part of our financing strategy is expected to involve seeking equity investments by LNG customers at a subsidiary level. If the types of financing we expect to pursue are not available, we will be required to seek alternative sources of financing, which may not be available on acceptable terms, if at all.

The following table summarizes revenue, costs and expenses for the periods presented (in thousands):